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Read Before You Sign

March 31, 2006

"Everything proceeds as if of its own accord, and this can all too easily tempt us to relax and let things take their course without troubling over details. Such indifference is the root of all evil." ~I Ching

Entrepreneurs are asked to sign many documents, from lease agreements to contracts with vendors. Each document includes a bunch of legal jargon, usually printed in five-point type, which you cannot read without a high-power microscope. A surprising number of entrepreneurs do not read the fine print carefully enough.

One entrepreneur I know had a contract for service work on some office equipment that he signed without reading because he trusted the sales pitch of the selling firm. Service was excellent for the first two years of the contract, but in the third year, the provider of the service stopped performing up to par. The entrepreneur sent a letter canceling the contract and thought he was through with this issue.

About sixty days later, the firm received notice that it was being sued in small claims court because it had not lived up to the terms of the contract the owner had signed. According to one critical clause -- contained in micro-print -- the entrepreneur could only cancel the contract by sending notice via registered mail, which of course he had not done.

This entrepreneur’s anxiety would have been allayed had he just read the fine print, a fault that he shares with so many people. They choose to trust the other party’s explanation of the contract rather than wading through all of the incomprehensible “lawyerese.”

It is just good business practice by your vendors to write contracts in terms favorable to themselves. A savvy businessperson should never forget that the nice person explaining the contract owes his loyalty to the vendor, not to the businessperson.

Just about every large corporation mandates examination of every contract by the legal department before it is signed. You too must be this careful. I encourage you to read or have read for you all contractual agreements so that you understand just how you are binding yourself. You may have a great relationship with a vendor, but relationships can sour quickly. You don’t want a one-sided, contract to be the vehicle for establishing remedies.

When a vendor does submit a contract to you and you have read it, you have the right to change any and all terms that are being presented. Most vendors are more than willing to make concessions on contracts in order to get business.

Now go out and make sure you have a process in place to review each and every contract.

You can do this!